Dutch Lady Milk (BBDT3033 International Marketing Strategy) PDF

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Part 1: Company background, segmenting and identifying opportunities in international markets 1.0 Introduction Dutch Lady Milk Industries Bhd (DLMI) was established in 1963 in Petaling Jaya, Selangor as a manufacturer of sweetened condensed milk. DLMI is a leading dairy company in Malaysia with a multinational management framework, focusing on a strong local business to stay close to Malaysian consumers. DLMI embraced the changing lifestyle of consumers and evolved in order to better supply quality dairy nutritions products to meet consumer’s nutritional needs. Today, DLMI with a strong workforce of about 600 employees have offered a wide range of high-quality and delicious milk based dairy products, from formulated milk powder, yogurt drinks to fresh milk and UHT (Appendix 1), distributed nationwide in order to help Malaysians to maintain nutrify and healthy as well as helping them to move forward in life with trusted dairy nutrition (Dutch Lady 2021 A). Dutch Lady Milk markets its products under various brand names, such as Dutch Lady, Friso, Frisolac, Joy and Completa (Emis 2021). DLMI is owned by one of the largest dairy cooperative companies in the world, FrieslandCampina and was the first dairy company listed on Bursa Malaysia. DLMI is also the first to introduce Formulated Milk Powder in the market (Dutch Lady 2020). Dutch Lady's target market is people of all ages, ranging from infants to adults. Japan is an international market that we suggest DLMI enter. DLMI can enter into Japan as Japan is one of the Asia countries which have similar culture to Malaysia. DLMI can enter the Japanese market as according to research, milk consumption in Japan is higher. Among 232 countries, Japan ranks at 11 with high milk consumption (Appendix 2). Milk and dairy products have become an essential part of the Japanese diet. According to research, the nationwide school closure has caused Japan to have a temporary oversupply of milk as the school lunch usually accounts for 10% of fresh milk consumption. Meanwhile, as more and more school-aged students stayed at home, the retail sales of milk in Japan have increased to 9 percent and when the schools reopened in June, it boosted the demand of milk by 43 percent within the month (Global Agricultural Information Network 2020). Therefore, this proves that Japan as a developed and advanced country is suitable for DLMI to enter with flavour milk products.

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1.1 Segmenting and identifying opportunities in international market Step 1: Nature of competition and level of market development Dutch lady is a competitive product in the existing market, has a variety of competitors and the barrier to entry is low. However, DLMI is still able to grow in the Japan market as drinking milk in Japan has become a habit and daily routine of Japanese. From 1954 onwards, the Japan government has agreed on the ‘School Lunch Regulations’ where milks are to be provided for students in elementary to middle school. Milk has become very popular for everyone to drink since young in Japan. Therefore, most Japanese grow up to drink milk as part of their daily life (Celia 2019). The most popular brands that can be seen in Japan's conbini or supermarket are Morinaga, Meiji, Megmilk or Yotsuba. Most of the milk available in Japan is full-fat milk or whole milk (Japan Yugen 2021). Therefore, DLMI may have a low risk when entering the market because milk is a general dairy product in the eyes of Japanese. DLMI can enjoy the ‘Me too’ little advantage from its various product lines. DLMI can offer Japanese their various flavoured milk such as Low Fat High Calcium Milk, Chocolate Flavoured Milk, Coffee Flavoured Milk, Kurma Flavoured Milk, etc. This can help DLMI better compete within the Japan market and help DLMI generate greater revenue as DLMI is known as a leading dairy company in Malaysia with a good reputation and their milky goodness is also made delicious to treat every taste bud. Step 2: The four-risk matrix

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The second step is to use the four-risk matrix to analyze Japan to determine the opportunities for DLMI to enter. The political risk in Japan is low. In terms of risk ratings, Japan ranks 29th out of 190 in the World Bank’s Ease of Doing Business Scorecard, showing an increase of 10 places in the latest survey. Compared with other developed economies, Japan’s paying taxes, access to credit, entrepreneurship, protection of minority investors, and cross-border trade are relatively easy. The lower risk of Japan’s expropriation is consistent with the lower political risk. Japan ranks among the top quarters in all governance areas, but it does not perform well in terms of voice and accountability (Export Finance 2020). The commercial risk in Japan is moderate. Japanese companies usually have a global perspective and are willing to make long-term investments in viable products and services (Export to Japan 2021 A). Many companies have been drawn into Japan due to its developed customer base which enables providing a strong market for established brands. The industrial risk in Japan is low. Japan’s F&B industry is stable and massive. Japan holds the second highest food consumption percentage at 23% globally. Majority Japanese people began to consume more milk since adopting Western habits. This is a great business opportunity for business within the F&B industry, as Japan's food is heavily dependent on imports. According to the data from MAFF, the consumption percentage of dairy products by Japanese is at 11%, higher than consumption of seafood, fruits, meats, etc (Alliance Experts 2019). Therefore, the opportunities for DLMI to enter the Japanese market for local consumption is high and the risk is low. The financial risk in Japan is moderate. This is because Japan’s currency rate is stable and Japan's economy rebounds from recession, growing 5% in the third quarter of 2020 (BBC 2020). This remains Japan as an attractive market for foreign companies and Japan is the world’s third largest economy which is growing steadily and the domestic demand is strong. Japan recovering from the recession caused less impact to the company’s assets, earning and operating income. In a nutshell, DLMI has a high country’s opportunity with low risk. Japan has an efficient and business-friendly regulatory environment for DLMI to enter.

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Step 3: Business Portfolio matrix The third step is using a business portfolio matrix to analyse the international marketing segmentation. It is a framework for evaluating the business portfolio and providing further strategic significance. DLMI has a medium country attractiveness in Japan due to its existing competitors such as Meiji Dairies, Morinaga Hokuriku, Snow Brand, Yakult, The Takanashi Group, etc (Dairy Product 2017). Snow Brand Milk is one of the largest dairy companies in Japan and The Takanashi Group also ranked among the top ten of about 200 dairy companies in Japan. Therefore, it may be difficult for DLMI to compete within Japan. However, with Japan as the world's third largest market after North America and China, the fertile ground for business expansion in Japan has matured. Japanese consumers seek novelty, quality products and their interest towards foreign’s good is increased (WEDC 2019). Therefore, DLMI still has the potential opportunity to expand their business in Japan. DLMI has a high compatibility with Japan. This is because the demand for milk in Japan is high. Japanese consume milk when they are small and milk has become an indispensable part of their diet. Besides, some dairy products are used by Japan’s restaurants and bakeries in serving western style food. Therefore, Dutch Lady can be their additional choice as DLMI produces milk that is rich in essential nutrients and vitamins to meet the needs of consumers of all ages and available variety of flavours. The Japanese market that is characterized by high education levels and high levels of income will be attracted by DLMI of high-quality goods. In a nutshell, DLMI has a primary opportunity to expand their business in Japan.

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Part 2: Deciding and justifying market entry strategies Co-operation strategies A joint venture is a cooperative arrangement between two or more parties, usually for the purpose of beginning a new business project or activity. Each party agrees to share their capital and resources, the same comes to end results for the benefits gained. An organization can take an equity stake in a company or establish a new, shared company with someone in the international society of its choice. DLMI could enter the Japanese market through a joint venture with Ezaki Glico. Ezaki Glico is a well-known Japan confectionery manufacturer and it is known for its iconic chocolatey biscuit “Pocky” (Appendix 3). The company is recorded as the second largest player in the Japanese ice-cream market as of 2019 (Tokyoesque 2020). Hence DLMI and Ezaki Glico set up an ice cream specialty shop with DLMI milk as the main ingredient. This enables DLMI to utilize their flavored milks product line such as Chocolate Flavoured Milk, Coffee Flavoured Milk, Kurma Flavoured Milk and comprises Ezaki Glico strength in producing and manufacturing products to enter the Japanese market by leveraging the sourcing of both companies. Since Ezaki Glico is the pioneer of producing Pocky, DLMI could use this opportunity to launch new flavors of Pocky snacks by using DLMI’s milk that suits the Japanese market. DLMI and Ezaki Glico should adapt the Pocky and according to Japan local taste such as products' sweetness that could attract milk lovers to try the new product and also shift the mindset of some people who have a bad impression of snacks. Strategic alliances offer a number of benefits that can be translated into direct business strategies. The strategic alliances that bring products to market in the first place allow companies to take firstmover advantages. Some strategic alliances deter competitors by providing better resources, distribution or competitiveness. It provides the potential to enter markets that were previously closed or difficult to penetrate. To enter the Japanese market, DLMI can have a strategic alliance with Japan Meiji Holdings Co Ltd (Appendix 4) in order to complement both companies' strength to penetrate Japan's dairy market. Meiji Holdings Co Ltd. is a dairy products company that has a strong brand portfolio, product development and distribution network while DLMI has great expertise and knowledge in milk sourcing and processing in offering different flavors of milk in its product lines to obtain diversification in the market (Meiji 2021). DLMI utilizes Meiji Diaries' resources to market and promote its dairy product and access new markets and distribution 11

networks in Japan that helps DLMI to gain market visibility and credibility more quickly (Dutch Lady 2021 B). In contrast, Meiji Holdings Ltd was able to gain knowledge from DLMI about their experience and expertise. Meiji can access knowledge in sourcing and roasting the highest quality of different flavour milks to make diversify for Meiji Holdings Ltd, as their weakness is lacking choice of flavours by just offering the original milk flavour, hence providing a win-win situation for both players in the market (Appendix 5). DLMI formed a strategic alliance with Daiso to share the cost of space by displaying all 200ml milk flavors in the DLMI product line in Daiso for selling purpose (Appendix 6). Daiso can charge DLMI for the use of its available shop space, depending on the extent to which the space is used. Since Daiso is the largest 100 yen chain store in Japan (Appendix 7), it is easier for DLMI to exhibit its brands and products to local Japanese customers by placing its products on Daiso (Daiso 2021). DLMI enables increased cost effectiveness by unnecessary for wide publicity, thus reducing advertising cost via utilizing Daiso's reputation and its broad range of local customers in Japan. Daiso's main customers are families and teenagers, the target range is similar to DLMI as both parties are selling different product ranges hence will have no impact on both parties profitability through their collaboration. The strategic alliance assists Daiso to increase the amazing product range with overseas products by adding DLMI milk in their retail store while DLMI can effectively create an international image in Daiso as mostly Daiso products are supplied domestically. Distributors and agents It refers to a distributor purchasing a product from a company and markets it to an end-user in another country by providing them with a profit margin by way of a price increase. They manage all distribution, marketing and advertising and manage to represent the company in all aspects of sales and service. DLMI can adopt this strategy by producing and manufacturing their products locally, they can transfer these goods to distributors and agents in Japan. The distributors and agents serve as intermediaries that help DLMI to sell the flavored milks all over Japan. This allows DLMI to save time in searching for potential distribution channels which the company might challenge to do so since they are unfamiliar with the customer demand in the new market. The intermediary company that DLMI can consider would be Lacto Japan Co, Ltd. (Appendix 8) which is an intermediary that supplies most dairy products from oversea sources to the Japan market. The 12

company handles up to 39% of the imported dairy products to Japan (Lacto Japan 2021). Due to its diverse and large customer base, DLMI can reach a bigger market in Japan as the distributor specializes in dairy product businesses. DLMI seeks for Japanese agents through word of mouth because this ensures that the partners they reach are of good quality and a wide network of people. An important thing for DLMI to note are the criterias to a suitable distributor or agent, which includes having prior understanding of Japanese culture, consumer behaviour, demand, and pricing strategy (Alliances Expert 2021). These benchmarks allow DLMI to find partners who can become intermediaries helping them overcome culture barriers. Licensing A licensing agreement is a contract between licensor and licensee, in which the licensee allows the use of the trademark, brand name and the ability to produce and sell products owned by the licensor. The licensee pays royalties fees to the licensor in return. DLMI can purchase licencing of anime characters from Toei Animation, one of Japan's leading anime film companies in order to collaborate and coordinate with Toei Animation to launch new packaging of milk with anime characters (Toei Animation 2021). For example, One Piece is one of the most famous anime in Japan, it has many characters and a large anime fan base hence launching milk packaging with One Piece image is able to boost exposure to the public (Appendix 9). By collaborating with Toei Animation's animators to create numerous characters from One Piece to match the packaging of dairy products, it will help strengthen the brand presentation of DLMI in Japan, a country that values anime culture. Recycling is important in Japan, a collaboration between both companies could introduce a variety of recycled bags and reusable bottles with different versions of anime characters from One Piece, to promote a positive impression among Japanese anime fans and children. Both companies even can launch limited editions for certain characters to boost sales as anime lovers would like to collect all available versions that launch in the market.

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Part 3: Building added values through adaptations Think globally, act locally must be the priority for DLMI to expand its market and achieve greater levels of customer satisfaction in the Japanese market. Product Brand name Dutch Lady with its main brand commitments include, “To Gain Knowledge and Experience” and slogan “Goodness for Life” must be translated into Japanese and aligned with its core values to successfully localize the brand. This allows DLMI to market itself as a good life charm in Japanese society. Although poorly translated names might not impact business success, global brands such as KitKat and Coca-Cola prove that good translation impacts both cohesive and international branding can localize products into foreign culture (Vanderberg 2019). Diverse tastes To cater to the Japanese market, DLMI could launch lactose-free milk because about 80% of Japanese have lactose intolerance. This means that they are unable to absorb the nutrients fully and properly in milk, which can lead to stomach-ache and indigestion (Li 2019). In addition, Japan is a health conscious country as they often consume healthier products (World population review 2021). For example, oat-milk and almond-milk are both lactose-free milk that could suit their stomach since Japanese people prefer tasty, healthy and organic food, this flavor is much in line with the local food culture (Nishizawa 2021). DLMI could introduce plum and sakura flavored milk to adapt with Japanese cultures as both are best-known flowers in Japan. Japanese always consumed plum in their eatery culture such as pickled-plum (Umeboshi), (Appendix 10) and plum-wine, ever since plums were introduced to Japan in the 17th century (Tastessence 2020). Japanese perceive sakura as the embodiment of beauty, mystique which leads their high demand spirit towards sakura-related products covering skin-care and food beverages (Helen 2016). For example, Starbucks Japan, KitKat, and Pepsi have launched sakura-flavored foods and beverages (Appendix 11-13) to fit Japanese’s taste and culture.

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By adding the Japanese's element, the favorability and willingness of consumers to purchase Dutch Lady’s products will increase. Launching products based on Japan’s seasonal fruits enables DLMI to localize in the market better. Since the Fuji-apple is the most representative and popular fruit in Japan, DLMI should launch Fuji-apple flavored milk during its harvest season in autumn to approach Japanese preferences. Design DLMI milk products can be designed with a small, curved notch opposite the milk carton (Appendix 14) opening to prevent from purchasing the wrong milk, which also tells consumers the correct position to avoid opening from the wrong side. This is because the survey found that people with visual impairments have difficulty distinguishing between milk and other beverages (Iknidane Nippon 2017). Therefore, the government encouraged this design in cooperation with manufacturers. Packaging According to Japanese researchers, most product packaging in Japan is usually contained with mascots, colourful and anime characters. Some packaging puts textures and exotic formats to attract and impress consumers (Kevin 2018). Therefore, DLMI must modify the milk packaging according to Japanese preferences by adding motivational and cute phrases in terms of Japanese so that it easily attracts their eyeballs and is understandable by local consumers. Colour variant According to research, Japanese generally dislike aggressive and strong colours unless in some special cases. Research revealed that colours such as turquoise, pink and peppermint-green are most acceptable by Japanese and the less risky colours for goods (Color Dream 2019). Therefore, DLMI can integrate those colours with blue which is the symbolic colour of Dutch Lady in the Japanese market. Pink is also suitable to represent sakura flavored milk while peppermint green means healthier food that can represent oatmilk.

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Price Pricing strategy Price settings in Japan are usually inflated by 20%-30% and rounded to the nearest 100 digits. Japanese culture has unlucky numbers that are best left off the end of the displayed price in which “4” is pronounced as "death" while “9” is pronounced as "pain" (Export to Japan 2021 B). Unlike most sellers, the Japanese prefer setting prices by integers rather than psychological prices. They likely set a product at 100-Yen instead of 99-Yen. Therefore, DLMI should set the price in terms of Yen, and abstain from those conditions to fit with their price localisation strategies. DLMI should apply competitive driven pricing by matching with the competitor’s price. ...